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The disengagement of Highmark and UPMC is looming on the horizon;

most of the hospital participation agree-ments between these two competing health care systems end Dec. 31. There are some hospital agreements that continue, such as those at Chil-dren’s and Magee, but the focus of this article is not the review of the various hospital participation agreements.

Instead, the focus of this article is the disengagement impact on physi-cian productivity and compensation, and what, if anything, physicians might do to prepare for that impact.

The potential problem applies equally to the physicians employed by UPMC, physicians employed by Allegh-eny Health Network, and independent physicians, although from different perspectives, as follows:

• Physicians employed by UPMC are faced with the loss of patient volume from patients with Highmark health insurance plans. They also will face the loss of revenue associated with any quality incentive programs;

• Physicians employed by Allegh-eny Health Network already have lost patients insured by UPMC Health Plan, which has since inception treated non-UPMC hospitals and physicians as out of network. Now they also risk loss of patients whose coverage was pro-vided by Highmark but through employ-ers that might switch from Highmark to Aetna, Cigna or United Healthcare (“unaffiliated payers”) as fallout from the hospital participation disengage-

ment (as noted in Bill Toland’s Pitts-burgh Post-Gazette article Feb. 19);

• Independent physicians could suffer similar volume decreases if current patients insured by Highmark are covered through employer plans that change affiliations to either UPMC Health Plan or the unaffiliated payers, and could lose Highmark participation if they lack privileges at a Highmark network hospital as required by High-mark’s credentialing requirements.

Physicians employed by either UPMC or AHN presumably have little control over the participation decisions of the systems. The standard em-ployment contracts of both uniformly require physicians to participate or not participate in the third-party plans selected by the employer. Those employed physicians should seek, or should have sought when they negoti-ated their employment contracts, com-pensation and productivity provisions in their employment contracts to account for loss of patient volume caused by the disengagement.

• If those employment contracts pro-vide compensation that is unrelated to volume or collections, or is guaranteed in some other way, then the loss of patient volume may not be problematic.

• However, if physician compensa-tion (either base or incentive compen-sation) is predicated on maintaining or attaining certain volume or collections, measured either by dollars or WR-VUs, then protection would require provisions that waive productivity or collection volume requirements when the decreases are caused by these strategic disengagement decisions.

Simply stated, if a system decides not to participate or cannot participate with a certain third-party insurer, and the physician is destined to lose 2,000 WRVUs because of that decision, then the physician should seek or should have sought contractual provisions to hold the physician harmless from that decision, by either reducing the produc-tivity requirement, waiving the produc-tivity requirement for a certain period of time, and/or providing for guaranteed compensation until either the physician or the system can replace that lost productivity.

Independent private practice physicians face a different dilemma. Although those practices have the dis-cretion and authority to participate with any third-party payer, certain third-party payers may decide not to participate with them, or the hospitals at which they practice may not be able to partic-ipate with all of the third-party payers. In addition, volume they previously received from Highmark participation may decrease if, as mentioned in the Toland article, some major employers

Practical considerations to protect against being ‘out of network’

Michael a. cassidy, esq.

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116 Bulletin / March 2014

are shifting their insurance from High-mark to either UPMC Heath Plan or Aetna, Cigna or United Healthcare.

The entry or increased presence of these unaffiliated payers is a direct result of the UPMC strategic decision to disengage with Highmark. During the last 10 years or so, Highmark paid UPMC handsomely, or at least hand-somely enough to justify or encourage UPMC not to participate with these unaffiliated third-party insurers. In the past, these unaffiliated third-party in-surers faced significant problems trying to penetrate the Western Pennsylvania market:

• Without access to the UPMC physicians and hospitals, which was a very large network even 10 years ago, it was difficult for these third-party insurers to sell insurance coverage if they were not included in the UPMC network, which is the same problem Highmark could be facing starting in 2015;

• The significant Medicare and

Medicaid populations, coupled with the Highmark domination of the commer-cial market (which was pegged at greater than 60 percent in prior years by the Post-Gazette), left little in the way of available patient base to justify spending significant sums of money to try to participate in Western Penn-sylvania, especially without the UPMC network as mentioned above.

Now that these unaffiliated third- party insurers have been permitted to participate with UPMC, they will pre-sumably become a larger presence in the market. Private practice physicians must evaluate the benefit of partici-pating with those third-party insurers, and compare those fee schedules with the fee schedules of the payers with respect to the potential lost volume.

Independent private practices may find they do not have enough economic leverage to negotiate with the new un-affiliated third-party insurers, although some local primary care practices and some specialty practices may have achieved enough leverage to at least negotiate with the unaffiliated payers,

and perhaps even Highmark and UPMC at this point.

Practice size has uniformly been seen as the leverage necessary to negotiate with third-party insurers. That always has been a problem in Western Pennsylvania because of the commer-cial domination by Highmark. Very few practices in the past have had the size necessary to negotiate successfully in that context. Perhaps they will have better success with the new insurers seeking to enter the market.

Finally, independent physicians whose practices are heavily concen-trated at a hospital that may become “out of network” should obtain privileg-es at a hospital or hospitals that would be expected to participate in those insurance plans, both to protect their patient volume and to maintain their Highmark participation.

Mr. Cassidy is a shareholder with Tucker Arensberg and chair of the firm’s Healthcare Practice Group. He can be reached at (412) 594-5515 or at mcassidy@tuckerlaw.com.

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